Home Loans for Self-Employed

If you are newly self-employed, your options are more limited because you won’t have the required documentation (i.e., tax returns) to prove your income. Self-employed applicants are generally considered higher risk due to income fluctuations and uncertainties, and this is especially the case when you are first starting your business. However, there are still instances where lenders can accept your income. Some lenders may consider your previous employment income, particularly if your projected earnings from the business align with your previous salary. For those who have been in the same industry for a while before starting their business, it may be possible to get approved if you can provide 12 months of financial statements. It is important to work with a broker who can put your application in the best light by highlighting your strengths and industry experience. We have lenders on our panel who will take a commonsense approach where they will consider your application based on relevant industry experience. 

Yes, how lenders assess your income and expenses can directly impact whether your loan is approved or declined, as well as how much you can borrow. By correctly presenting your income and managing add-backs, you can improve your chances of approval. For instance:

• Add-backs: Adding back one-off business expenses or depreciation can make your financials stronger, increasing your borrowing capacity and improving the chances of loan approval.
• Business Health: Lenders will assess the health of your business, including profit and loss statements, tax returns, and overall cash flow. A stable, profitable business is key to a successful application.
• Expense Management: Understanding how expenses, including personal vs. business expenses, are treated can make a significant difference in your ability to borrow.

Many self-employed borrowers overlook the opportunity to increase their borrowing capacity by accounting for add-backs. Add-backs are non-cash expenses that do not affect your actual income but reduce your taxable income, such as:

• Depreciation on business assets
• Non-recurring business expenses (e.g., one-off legal fees, repairs, or other large costs)
• Interest on business loans that may not need to be factored into your personal expenses

By knowing which expenses can be added back to your income, you can boost your borrowing power and improve your chances of approval. Each lender has different add-back rules, so it’s crucial to understand these nuances to maximise your borrowing potential.

Sometimes you may not be in a position to supply all the documentation that the lender requires. For example, you may be behind in finalising your taxes with your accountant and therefore do not have up-to-date tax returns available. 

In these instances, you may need to consider a low-doc home loan. Low-doc home loans are designed for self-employed borrowers who may not have the standard documentation like company financials or tax returns. These loans offer a flexible solution for securing a mortgage when traditional income proof isn’t available, but they often come with higher interest rates and stricter requirements.

A skilled mortgage broker can help you navigate the complex assessment process by:

• Advising on the best documentation: We know what lenders want to see and can help you prepare your application for the best chance of success.
• Maximising add-backs: We can identify expenses that may be eligible for add-back and help you present these to the lender to improve your borrowing capacity.
• Finding the right lender: Each lender has different policies around assessing self-employed applicants. We can match you with the best lender that aligns with your financial situation and needs.
• Explaining lender policies: We help you understand each lender’s specific criteria for things like add-backs, depreciation, and other expenses that can affect your application.